Yahoo-Google ad test triggers DoJ antitrust scrutiny

It has now been several weeks since Yahoo began experimenting with running …

The US Justice Department has launched an investigation into Yahoo's test run of Google ads launched earlier this month. Although both companies alerted the Justice Department of their plans before the test began, officials are apparently concerned about possible antitrust violations when it comes to the two major search companies collaborating.

Several weeks ago, Yahoo inked a small, temporary deal with Google to test out Google ads on a number of Yahoo's search result pages. The ads would only run on up to three percent of Yahoo's search pages, and only for a couple of weeks. The point of the test was to show that Yahoo's searches could be valued much higher than Microsoft thinks they are, and some analysts speculated that outsourcing the entire Yahoo search advertising function to Google might increase Yahoo's cash flow by 25 percent in the first year. Just over two weeks later, "inside sources" reported that both Yahoo and Google were happy with the results and hoped to extend the partnership.

The Justice Department has not yet made an official announcement about the investigation and will only acknowledge that it is aware of the collaboration. However, an anonymous source told Reuters that the deal was being looked into because of a phone call between Google CEO Eric Schmidt and Yahoo CEO Jerry Yang, wherein Schmidt allegedly offered help in thwarting Microsoft's bid to buy the company. Another source told Reuters that the department was "concerned about a longer-term deal" between Google and Yahoo.

Of course, Microsoft can't be too thrilled about the companies' collaboration either, especially since it appears to be for the sole purpose of forcing the company to walk away. After all, if shareholders see that profits could be higher after partnering with Google, they won't be so willing to accept a hostile Microsoft takeover. And walk away it might if a deal doesn't work out, as Microsoft CEO Steve Ballmer indicated in a press conference yesterday.

All of this assumes that Yahoo is even able to move forward with Google once this investigation is over, though. The company seems to think that it's all in the clear because it hasn't hidden its intentions from the DoJ. "Yahoo proactively kept the Department of Justice informed of its intention to conduct this limited test with Google and has provided information to the DOJ on the nature of the test," Yahoo spokeswoman Tracy Schmaler told Reuters.